tv The Journal Editorial Report FOX News August 6, 2011 2:00pm-2:30pm EDT
don't kid yourself. talk to your doctor about your risk and about lipitor. [get out of the way. >> special presentation. captions by closed captioning services >> announcer: this is a fox news channel special presentation. "on the brink" now neil cavuto. >> neil: france is ahead of us. as of last night more than a $countries are ahead of us. for the first time in 70 years the united states of america is no longer the top financial dog on earth. standard & poor's taking care of that yesterday. officially drinking our top notch aaa rating and kicking us out of an elite club that includes france, germany,
switzerland, australia, not us, not now. we are in with belgium and new zealand now. just getting our arms around that not proving easy. for years, top of the heap. now all but kicked to the curb. growing fears come monday morning we are going to get kicked in the markets, we don't know. here is what we do know. after all of the spending the world is telling us, we are spent and the jig is up. and the pain could be severe. we are all over the fall-out that could be swift. with the likes of presidential candidates michelle bachmann, ron paul and herman cain. who say the spending has got to stop. dennis kucinich says the spending has to double. and mark zhan did who says republicans and -- democrats have talk. before that, the latest on what is happening now. georgia republican jack kingston calling on congress to reconvene immediately to pass a new deal.
the congressman will be here later this hour. china wasting no time saying, the good old days of borrowing are over. in europe, g-7 finance ministers will meet to discuss the impact of the downgrade. dow losing 700 points this week, before the s&p announcement. saudi arabia the first market on earth to trade on this news, since this news it want pretty. stocked down 5 1/2%. the problem is not the downgrade, it is debt that brought it on. a message that seem to the best getting lost. my next guest ron paul on the phone. congressman, you weren't and aren't surprised, but what now? >> it looks like we are in for big trouble because we haven't dealt with the problem. i'm surprised it took them so long to downgrade. i don't think it should have had that rating for a long time. people coming to the realities. you wonder about s&p, because
they are usually slow. i think it is very, very bad. it is interesting that when we were working on raising the debt limit over my objections, they kept saying if you don't raise the debt limit we are going to downgrade you. raised the debt limit so they downgrade. which means the spending something not under control. the other thing that bothered me is, i read where s&p said that one of the reasons they downgraded was that we weren't accepting tax increases. there's a lot of confused economic ideas out there. i think we are in for a lot of trouble. which is what i've been saying for a long time. >> neil: the administration has -- saying s&p math is specious could be the case of accusing the accused. what do you make of that? >> you mean about the treasury saying they made a mistake? >> neil: right. this is s&p's fault. >> well the congress is making
bigger mistakes, because they keep talking about slashing and cutting and all this. there have been no suggestions of cutting anything. it is always the cutting baseline which is steady increase. finally, the people who are looking at the bonds are realizing it. to me it is interesting that although they are downgrading it still the world is buying our bonds for now. [ talking over each other ] >> neil: i guess what i'm asking is, we are concerned about the downgrade and whether it is going to cost us more just for people to buy our debt and our notes and our bonds. you are right to point out people have still been pouncing on our securities as good havens. how long do you think that will be the case? are we more benefiting bus the rest of the world just stinks more than we do? >> i think that the market is more powerful than the agencies who grade the bonds.
economic laws are powerful. which means if you follow free market economics interest rates will go uproarless of bond ratings this might be the incentive to start the rates going up again. no way you can bail out everybody and spend endlessly and not expect the dollar to be devalued as it is. worldwide currency, under those conditions you could appreciate the currency, interest rates are destined to go up, it is just a matter of time. >> neil: when i was in your fine city this past week and you guys cobbled together this deal of which you were very critical as was your son senator rand paul. the issue came up if you were to cut too much it would be onerous for the economy. is there going to be an appetite for cutting more spendinging in this environment? >> no, there isn't. -- there's also a special
interest that comes up. if you suggest freezing the budget, that is considered a cut. freezing the budget is a cut. anybody who has their budget frozen, yells and screams. if you imagine what the military industrial complex would say if you suggested freezing? they are getting a percentage increase and it is not enough. that's the way with every entitlement program there is. we are locked in on this coursese until we revamp the system entirely. monetary system, definition of entitlements, versus rights, our foreign policy within the next year or two we will be dealing with what kind of country we want in the future and what economic policies we are going to follow. >> neil: i guess it is hard to gauge now congressman, a downgrade could lead to a lot of messier things. congressman, thank you very much. >> thank you. >> neil: that deal was the source of some of this concern
and maybe s&p jumping. this 2.1 trillion dollar debt deal you hear so much about, it is over 10 years. 70% of those cuts come after the year 2017. 28 billion dollars over the next year. hence this criticism by the s&p that it wind much better than the paper it was principled on. the stunner from the white house this morning. no word from the white house. to charlie gasparino. >> why dwell on the negative. >> neil: like the big elephant in the room. >> bury the lead. this is the most telegraphed downgrade in the history of downgrades. i covered municipal bond market early in my career, corporate finance for a long time, i've seen how s&p and moody's deal with issuers of debt. they signaled they were going to downgrade this two weeks
ago. they said cuts or else. >> neil: moody's said the same then backed away. >> moody's did not say the same thing. when these guys go out publicly and say with it a press guy on the record then you know they mean business. whether this has a market impact that is the big question. >> neil: when moody's early on they tried to walk it back. >> nobody was more adamant than s&p. >> s&p was in this box. you think had they made it four trillion, s&p would not have done this? >> yes. there's a little politics on this i think they boxed themselves in. they didn't want to do this. the fact they came out so heavily and said if you are trillion -- >> neil: you are right. we talked to david about in. >> everyone will point to s&p, they lead to financial armageddon. does that come into play the
potential for that? >> we've lowered sovereign governments with aaa ratings before. >> neil: but this is the united states of america. >> it is the u.s. we rate 1 governments. we've downgraded japan's ratings. >> neil: like i said this is the united states. >> i got it, but we take a global view. >> neil: to your point, the united states is no different than japan. >> almost scary that bureaucrats like that have so much power this is an opinion of corporate bureaucrats, he mate be a nice guy but that's what he is. agency that missed the biggest financial an -- >> they are the only game in town. >> there's another game in town call the market. i think had is going to have political ramifications. we have a president the first in my life since 70 years of bond ratings who lost the u.s.a.'s aaa rating.
the bigger question is the market come monday. is the stock market, particularly the bond market, remember and i will tell you, i don't think so. >> neil: you don't think what? >> yesterday, i -- last night i smelled this thing coming. how? because i knew that the -- >> neil: you don't think what is going to not happen? >> i don't think the bond market is going to implode. you smelled this coming because government officials, the issuers that get the press release, they were telling us that this might happen, right. when i'm doing that i'm calling the wall street firms. is this baked into the market? yes.=+j: >> neil: will we have to pony up more to get the chinese, japanese, germans, canadians to buy our debt? >> only if there is a better alternative. that's what the market will tell you. i don't think there is. where are you going to put your money? if you want a safe haven?
are you going to put it in the finished treasury bond -- in the finnish treasury bond or the chinese treasury bond? >> neil: there are others that have not downgraded. what are we to make of that? >> i think the markets, people who buy bonds are sophisticated. they have their own rating systems in-house. this might impact the stock market. traders trade off deadline, they hit the button, maybe. i think s&p did us a favor by doing it over the weekend. we'll have two days talking about split ratings, look at moody's and fitch. kneel they'll that was by design as you reported -- >> neil: that was by design as you reported. >> i thought that was the time they would do it. [ talking over each other ] >> neil: thank you charlie.
kneel feel to the white house now where this downgrade -- >> neil: to the rite now where this downgrade did not come -- ed what are you hearing? >> reporter: there was a behind the scenes struggle yesterday afternoon and evening where the treasury department was trying to point out to s&p look you have a math error and you have overcounted two trillion in debt that the white house believed was overstating the problem. at the end of the night, official s&p still moved forward with the downgrade.
i think the first impact for the president is the fact when you look at the morning papers, that you know, decent jobs report yesterday it want great but there was job growth, better than wall street was expecting. that's the second or third story. the first story of course much bigger type, is the downgrade. the president can't catch a break when he gets a jobs report that is overshadowed. the reason why the administration was fighting furiously to push-back on s&p yesterday afternoon and evening is they though it is going to be a stain on his presidency. something that will follow him to the history books the first president to have this happen on his watch. obviously it will follow him into november 2012 and be part of the republican campaign ads, going to come up in the debate. you are the guy who had our debt downgraded, first one ever. certainly, there's plenty of blame to go around. the president waited 2 1/2 years to get serious about
deficit reduction. he didn't follow up quickly on the simpson-bowles suggestion. not all this debt was all -- the downgrade is happening on the president's watch. not all the debt was piled up on his watch. when he took office he had things handed off from a republican president who fought two wars without paying, had the medicare prescription drug benefit that wasn't paid for. both parties have been piling up spending for several this has lead to this point. but the commander in chief is the one who is largely going to get the focus of this. that's why they are going to be watching the markets monday closely. >> you mentioned this has occurred unboth parties' watch, true enough. under this president -- under this president it happens, unfortunate for him. there's growing calls for geithner, the team is not doing that great. it is like you are starting
off the season 0 and 8 you go for the easy target that would appear to be geithner. is he gone? >> reporter: i think they want to keep him. geithner may the guy cheering on the republicans, i'm joking of course, cheering on the republicans to get him out. he's been trying to leave. he's kind of tired. he's been going at this for a long time many he would like to move on, indications from people inside the administration. the president the chief of staff has been urging him to stay on. you have to wonder after this, while they were expecting this could happen, do they think maybe there needs to be a change? my sense of this president in covering him for in three years now, is that he's not someone who likes to do change for change's sake just to throw somebody a bone and say fine, i'm going to push him out. i think he personally likes tim geithner. i think he's going to want to stick with him. the other issue moving forward is going to be the pressure of
not just ratcheting up on this president, but on the super committee on capitol hill if you look at it. the fineprint of what s&p said, they also cited concerns not just about the debt piling up but washington being deadlocked, not being able to govern. they cited concerns that new revenues have dropped down on the menu of policy options. congressional republicans had taken taxes off the table. the president was talking about adding tax revenues to this debate. the super committee will look. is there going to be a mix of things? spending cuts as well as potential tax revenues if they don't raise tax rates? part of the reason why s&p moved is that there was only a trillion upfront in cuts in this debt deal. >> neil: most of that was postponed. >> reporter: postponed. they are promising 1.5 trillion more by the end of the year. that's if the super committee
can get its work done. >> neil: all i know is we have a crisis and it started with you coming to fox. >> reporter: i had nothing to do with it. >> neil: seriously buddy, so glad to have you, ed henry in washington. >> if this is the sell-off we get without a downgrade, was come monday? with one. a lot of times, things are right underneath our feet, and all we need to do is change the way we're thinking about them. a couple decades ago, we didn't even realize just how much natural gas was trapped irocks thounds of feet below us. technology has made it possible to safely unlock this cleanly burning natural gas. this deposits can provide us with fuel for a hundred years, providing energy security and economic growth all across this country. it just takes somebody having thidea, and that's where the discovery comes from. that's me
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then what? >> i don't think it makes sense to have a tax increase with this type of economy. when you look at this debt stuff and i've watched your show and a number of others. the real question to ask -- >> neil: why are you watching any others? >> i don't, just that fox has other people on. kneel neal that's okay. >> is that okay? -- noel noel go ahead, thank. >> ask yourself when should a country borrow? we are borrowing huge amounts now. there's nothing wrong with borrowing money to create prosperity. every growth company in the world borrows money to create growth. growth countries should be the same way. we are borrowing money to basically pay people who are unemployed, who should be working. borrowing money to subsidize losing companies that should be allowed to sink. borrowing money to fight wars in countries we don't even -- this is the wrong time for [ inaudible ] we are running up deficits and we are destroying our ability
to borrow in the future if we need to. neil, i don't know whether s&p was right to downgrade us or not. but we are borrowing at the wrong time. borrowing is a privilege that a country should use only when it can use the proceeds to create greater prosperity. that's not what is happening. >> neil: you are right about that. i want to talk to mitch mcconnell he told me we could have gotten to the four trillion figure. it would have meant revenue hikes, tax hikes. >> he was right. we should not do tax increases now. we have a spending problem, it is an entitlement problem. we have a huge entitlement problem getting worse everyday because the inments themselves are causing the -- because the entitlements themselves are causing the disastrous economy. government spending is the problem. unless we solve that, we can't
get our prosperity back. >> neil: good stuff, always good you. >> i love your show, by the way this is interesting. >> neil: don't flip around and watch any other people. me and this network, fine but leave it at that. seriously, thank you. >> meanwhile [ unintelligible ] mark, your agency passed on a downgrade, s&p did not. i know that's not your bailiwick in that department, but what do you make of that? >> i'm not going to comment it is their rating, their opinion. >> you agree? >> i think moody's and fitch disagree. there's reasonable grounds for disagreement. i think the impact of this, the most important point is the impact should be small to charlie gasparino's point this
has been pretty well telegrahed. i think that is correct. markets are -- were anticipating the downgrade. i don't think it is going to have a significant impact on financial markets not long lasting. >> neil: i worry about that. normally, when you get corrected or slapped up sigh the head it is supposed to be a -- upside the head, it is supposed to be a wake-up call many if we don't suffer that much, and we go on our way where is the resolve going to come or what would incentivize us to change our ways? >> i think we go the wakeup call. we are all concerned about the fiscal situation. i think we made a lot of progress. i think the deal was substantive. it doesn't give us the sustainability, the four trillion we need to get there, but it got a long way there. the two trillion in cuts are substantive. i think they will occur. i think --
>> neil: you think they are substantive? >> i really do. >> neil: 70% are after the year 2017. >> that's the way it should be because the economy is still soft and can't digest significant cuts at this time. >> neil: mark zandi, thank you very much. coming up: >> is there a risk the united states to lose its aaa credit rating, yes or no? >> no risk. >> s&p an wrong the u.s. will keep its aaa rating? >> absolutely. >> neil: pressure mounting for tim geithner to step down. michelle bachmann, herman cain who says that guy has got to go. [ male announcer ] 95% of all americans